Assignment: The Balance Sheet

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Assignment: The Balance Sheet

Assignment: The Balance Sheet

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Explanatory notes for the balance sheet and the other financial statements should identify extraordinary events, as well as certain required provisions, and should be presented following the financial statements. In fiscal years beginning after December 15, 2018, public organizations and not-for-profit organizations that have issued securities that are traded or listed on an exchange or over-the-counter market will be expected to present the effects of all leases on the balance sheet (the deadline for all other organizations is fiscal years begin- ning after December 15, 2019). ASU 2016-02, Leases (Topic 842) intends to increase transparency and comparability among organizations by requiring all organizations, not just healthcare organizations, to present the effects of both financial leases and operating leases on the balance sheet (historically, organizations have not presented the effects of operating leases on the balance sheet). The organization should recognize a liability (lease payments) and a right-of-use asset on the balance sheet (Connor and Mosrie 2016).

stAtement of oPerAtIons

The statement of operations, called the income statement in for-profit organizations, sum- marizes the organization’s net revenues, expenses, and excess of net revenues over expenses (called income before taxes in a for-profit organization) over a period of time (see exhibit 3.2). The relationship of the statement of operations to the balance sheet can be best expressed by the following expanded accounting equation:

Assets = Liabilities + Net Assets + (Net Revenue – Expenses)

where the permanent accounts of the balance sheet, which are accounts that carry balances forward to the next year, relate to the temporary accounts of the statement of operations, which are accounts that zero out at the end of each year. To zero out the net results of the statement of operations at the end of the year, the net results are transferred to unrestricted net assets on the balance sheet (or to retained earnings on the balance sheet of a for-profit organization).

Revenues are the amounts earned by the organization or sometimes donated to it. Gross patient services revenue is the total amount of charges for patients utilizing the hospital, regardless of the amount actually paid. Deductions from gross patient services


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